The persistent uncertainty in financial markets, along with high interest rates around the world, have raised the allure of holding on to cash — but one equities expert says this may not be the best idea. “We’re at a point where cash deposits or money in cash and money market funds is the highest it’s been — a lot of investors are saying, maybe the [U.S. Federal Reserve] is peaking or going to cut rates so I should keep my money in cash — but I think that would be a missed opportunity,” Andy Budden, investment director of equities at financial services firm Capital Group, told CNBC Pro. A number of U.S. data points last week indicated that the persistently high inflation of the last couple of years could finally be easing, raising expectations that the Fed could be about to start cutting interest rates in a big way next year. Budden said it’s time for investors to “have a bit of courage and start to get invested in financial markets again,” naming opportunities in both fixed income and equities. Bonds The case for fixed income is “fairly clear,” according to Budden, who was speaking on Nov. 9. “If you take some of your cash and buy a bond portfolio, you can lock in high yields for several years and potentially actually enjoy some capital gains as well.” By comparison, he said that if you “just stick it in cash,” its value is likely to get eroded by high inflation. He identified higher quality, investment-grade bonds as a good entry into the market. Stocks Meanwhile, the equities expert believes there is no better time to play the stock market. “Accept that there’s always going to be a bumpy ride with equities, so it is now more of a case that it’s a good time to start building an equity portfolio,” he said. While one’s allocation to bonds and equities depends on one’s stage of life and goals, Budden said the traditional 60% equities and 40% bonds split makes “a lot of sense” for the average investor right now. “I think of that as a portfolio where you, on the one hand, absolutely want to grow your savings [which] would mean having an allocation to return-seeking assets [such as] equities,” he said, while also having a strong foundation that can weather significant drawdowns at different life stages. ‘Haven’t missed the market’ As much as Budden is optimistic on stocks, he cautioned that “not all equities are the same.” For one, the so-called “Magnificent Seven” stocks – Alphabet , Amazon , Apple , Meta Platforms , Microsoft , Nvidia and Tesla – have been reigning supreme this year. Their sharp gains have made up around 50%-60% of the increase on the S & P 500 index this year, he noted, adding that the index only had a “small positive” when the seven stocks were excluded. Year-to-date, the S & P 500 is up around 18%. “So, you haven’t missed the market at all – in fact, there are a lot of very good stocks this year,” Budden added, identifying healthcare and digital disruption as two key themes on his radar right now. — CNBC’s Katrina Bishop contributed to this report.
Investing in cash? Buy stocks and bonds instead, says Capital Group’s Andy Budden
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